Today the suddenly subdued IG dollar DCM hosted one $800mm two-part deal from Harley-Davidson Financial Services in the form of a 2-year FRN and a 3-year fixed rate senior unsecured transaction. In fact, the SSA space outperformed on the volume front thanks to Kommuninvest’s $1b 3-year bringing the all-in IG day total to 2 issuers, 3 tranches and a mere $1.8b…………What gives? Well, look at the CT10-year that closed out yesterday’s session yielding 3.07% and 3.10% today. U.S. interest rates are going up, though they’ve been tame thus far as they begin their trajectory.

In speaking with Mischler’s resident Treasury guru Tony Farren about the subject of rising rates today, the very first week of 2018 (Jan. 2-5) saw the 2yr (1.891%), 5yr (2.213%), 10yr (2.416%) and the 30yr (2.749%) all trading at their 2018 YTD low yields. Fast forward to today – both the 2yr (2.589%) and 5yr (2.941%) are at the highest yields since 2008; the 10yr (3.10%) is at its highest yield dating back to 2011 while the CT30yr (3.22%) came to within 1 bp of its YTD high which was the highest yield since 2015. The market IS and always has been ahead of the curve, while the Fed has ALWAYS and will forever be a market laggard. It’s the nature of the beast we call “the market.” Rates are finding a new level and that level is HIGHER folks!

Things could certainly be changing especially after S.F. Fed Chief Williams’ comments yesterday in which he said he’s “very positive” on the domestic economic outlook and shared his view that we can sustain 3 to 4 rate hikes in 2018! The statement has more impact than it typically would, especially considering that Mr Williams will soon upgrade to a much more powerful role as the NY Fed Chief. There is a large contingent of people and market participants who would like to see Fed-speak banned (other than post-FOMC Press Conferences and Q&A). Still, rates are going up folks. Just have a look at the emboldened U.S. dollar for evidence. Look at Emerging Markets, especially Argentina and Turkey. They are signals not only of their own domestic issue,s but also the rising rate environment. Sprinkle on some powerful geopolitical risk factors like the bubbling Middle East, Iran vs. the unlikely Dynamic Duo that is quickly becoming Saudi Arabia and Israel, and Kim Jong-un’s recent comments threatening to un-schedule the June 12th denuclearization talks. China, Italy, Washington dysfunction – they are all among the starring players in an endlessly rewritten historical epic scenario that beckons a script doctor’s skills to fill in the holes, add some character arcs and tie all the plots and subplots together to achieve a nice, neat denouement. Guess what? That happy ending is not coming; after all, this is the reality, not illusion and we, readers are realists. This is Wall Street, not Hollywood. At least I think and hope so.

So, the 3.095% CT10yr yield was the wake-up call that gave pause for today. We are also running $7b shy of this week’s syndicate estimate, but tomorrow’s another day!

Here’s a look at the WTD and MTD IG Corporate new issue volume as measured against syndicate desk estimates:

The IG Corporate WTD total is 79.32% of this week’s syndicate midpoint average forecast or $26.905b vs. $33.92b.

MTD we’ve priced 64.28% of the syndicate forecast for April IG Corporate new issuance or $86.675b vs. $134.84b.

There are now 15 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 2 IG Corporate-only new issues was <15.00> bps.

BAML’s IG Master Index was unchanged at +114. (It’s post-Crisis low is +90 set on 2/01).

Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 1.09 vs. at 1.08. (0.85 is its post-Crisis low set on 1/30).

Here’s a look at MTD IG Corporate new issue volume as measured against syndicate desk estimates:

The IG Corporate WTD total is 50.79% of this week’s syndicate midpoint average forecast or $9.477b vs. $18.66b.

MTD we’ve priced 47.28% of the syndicate forecast for February IG Corporate new issuance or $42.067b vs. $88.98b.

There are now 6 issuers in the IG credit pipeline.

At the Crossroads of Art & Science: EXC-plaining a 10 bp Spread Differential

Last evening I wrote a bit about Exelon’s $800mm CoMed 30-year Global Secured FMBs rated A1/A-/A that priced at T+85 on Monday that printed with a 7 bp NIC. The comp used for the relative was the outstanding CoMed 3.75%s due 8/2047 that were T+78 pre-announcement pegging NIC as 7 bps. The order book finished at $1.85b for a 2.31x bid-to-cover rate. Those bonds are T+83 bid this afternoon or 2 bps tighter vs. NIP. Some of the reasons for the 7 bp NIC were:

It was an $800mm deal size that needed a bit more to clear

Market volatility/uncertainty

Exelon has numerous subs that need to issue and we all know that investors have long memories. In other words, do the right thing at an inflection point of sorts in our market and investors will come back to you in spades.

Now let’s fast forward to today, a mere 72 hours later, in which Exelon’s PECO Energy priced a $325mm 30-year that is also a Global Secured FMB rated Aa3/A that priced at T+77. Today’s PECO comp was the outstanding PECO “EXC” 3.70% due 9/2047 that was T+80 pre-announcement nailing NIC on today’s new issue as negative <3> bps. WHOOOOAA! A 10 bp differential between the two and remember as a 30-year there is no curve adjusting and both entities have direct comparables to use for a relative value study. We all know that relative value is part art and part science!

On Monday 2/12 at 10:27am ET, and in the middle of CoMed’s book build, the VIX or “fear factor” was 29.70 versus this morning’s 2/15 opening session level of 18.50 when PECO was announced. That’s a whopping 37.7% drop in the all-important and eagerly watched VIX volatility index……more dramatic supporting evidence for the final spread level.

And guess what? Exelon’s Commonwealth Edison deal on Monday was the first utility to issue since the recent historic market gyrations! That nailed it for me. Ahhhhh! There it is! The search for a resolution in what seemed an illogical endeavor was discovered. It was a combination of many market ingredients including a dramatic VIX and was all about the utility that opened up the issuance doors for the sector. A question begot an answer with myriad moving parts and persistence really does pay off. So, to re-cap:

EXC’s CoMed deal was an $800mm deal size that needed a bit more to clear

Commodities – CRB, crude oil and copper up (+ $20 this week) and gold small loss.

CDX IG: -2.32 to 53.85

CDX HY: -11.23 to 328.23

CDX EM: -5.30 to 123.35

VIX: +0.33 to 19.59

*CDX levels are as of 3:30PM ET today.

-Tony Farren

The “QC” Geopolitical Risk Monitor

Updates are highlighted in BOLD print!

Risk Level/Main Factor

Geopolitical Risks

HIGH +
“North Korea”

· 2/15 – The Seoul Olympics kicked off on Fri. 2/09 and conclude Sun. 2/25. Sources tell me to “watch” mid-March thru April as NOKO will be back to its old tricks and the game will ratchet up with newly announced war games along with a much larger allied force participating together. It’s amazing how the world comes together in a spirit of healthy competition to participate in the Olympics. Events are governed by the standard set of rules and guidelines of each sport. Unfortunately, that’s not how the political world works. When NOKO dictator Kim Jong-Un’s sister, Kim Yo Jong steals the show thanks to an overwhelmingly liberal media at the Seoul Olympics it gives reason to pause. They should be focused on the torture, extermination, enslavement, sexual violence, murder and disappearances that take place every day in North Korean prison camps for starters. We’d all like peace to come to the Korean peninsula but let’s not be naïve. It was nice to see the two Korea’s march under one flag on the opening night of the Olympics but don’t be fooled. 1/25 -North Korea issued a statement encouraging the unification of the Korean peninsula asking all Koreans to “promote contact, travel, co-operation between North and South Korea” and saying it will “smash” all challenges against unification.1/16 – H.R. McMaster met with Japanese & SOKO security council members concluding recent talks with NOKO are a “diversion.” 1/02 – Kim Jong Un announced, “the entire U.S. territory is within the range of a NOKO nuclear strike.” 11/20 – Pres. Trump announced the U.S. designated NOKO a “state sponsor of terrorism.”

ELEVATED
“Trumponomics”
& The Beltway

· 2/15 – On 2/12 President Trump broke the GOP trend of fiscal prudence with his $4.4 trillion 2019 budget sent to Congress that is unlikely to be enacted as is. On 2/09 the gov’t. averted a shut-down signing into law along with a $1 trillion spending bill with major hikes to disaster relief, full-year funding for defense, infrastructure and our nation’s opioid crisis. Among major items on Trump’s 2018 agenda – a DACA fix, the Wall, Infrastructure Plan and Welfare Reform. 1/26 – Pres. Trump’s immigration reform plan proposes a DACA fix by offering citizenship to 1.8mm undocumented immigrants brought to the U.S. as children (Dems asked for 800k) in exchange for restrictions on future immigration and a $25b border defense system and wall along the Mexican border.

CAUTION
German coalition?
BREXIT & Terror

· 2/15 – March 2nd is a key date as Germany’s Social Democrats (Socialist Party) votes to approve or reject the recent grand coalition deal referred to as a “marriage of convenience” with Merkel’s CDU/CSU party to stabilize Europe’s keystone nation and economy. A “no” vote means new elections for the Hinterland and further political tension and turmoil. 2/08 -Angela Merkel sealed a grand coalition deal with the Socialist SPD party but gave up the finance and foreign ministry’s. Many Merkel CDU party members are upset that Wolfgang Schäuble, the longest ever serving German finance minister and a major architect of today’s Eurozone economy is now gone. The Socialist SPD party envisions a United States of Europe by 2025! Germany is the keystone of the EU and 28% of its GDP.

· 2/15 – PM Theresa May finally has cabinet members providing clarity on a post-BREXIT vision noting Boris Johnson’s speech on 2/14. He expressed an unwillingness for the U.K. to be tied down to EU regulation and alignment in lieu of British “choice”; avoided addressing a potential Second Referendum saying “….let’s not go there.” It w/b tumultuous for the U.K. to vote on any deal resultant from EU negotiations. Said U.K. will leave the Customs Union and called for a national debate on the low-skill immigration problem saying the U.K. should focus on the best indigenous talent. Supports stopping payments to the EU budget and total U.K. control of its immigration policy. Wants no EU political integration and a more global U.K. in line with its history. Refers to BREXIT future as more “hope” than “fear”. 1/01 – UK Parliament voted 309-305 requiring separate Act before BREXIT can be implemented dealing PM Theresa May a major setback in negotiations on the EU divorce bill. The U.K. is targeting an “implementation period” of March and completion by October 2018. U.K. withdrawal from the EU takes place in 3/2019.

· 2/15 – Italy’s center-right coalition party is expected to win the March 4th election with its leaders projecting sufficient votes to govern without a second ballot. Silvio Berlusconi, the man behind the Forza Italia Party but banned from serving due to a tax evasion charge, is calling for the EU to devise a Marshall Plan-like approach with MENA nations to help the latter keep their people from flocking to Italy which is choked by over 630,000 immigrants only 5% of which have the legal right to be there as refugees. Matteo Silvani head of the Eurosceptic Lega supports leaving federalized Europe (backed by Germany’s coalition SPD party). Italy has had 65 gov’ts. in 71 years. Unemployment is 10.8%; youth joblessness is 32.2%. Italy is the EU’s 3rd largest economy and has the world’s 3rd highest debt-to-GDP ratio at 132.5%; its national debt is $2.8 trillion (equiv.) It is the EU’s biggest economic risk.Italy’s banking sector holds $220bn of bad loans.

· 2/08 – Friction increased as the U.S. designated 3 Pakistanis as “global terrorists” linked to Al Qaeda, the Afghan Taliban and Lashkar-e Taiba militant groups. 2/06 – The U.S. gov’t said it would consider lifting its security assistance suspension against Pakistan if that nation took immediate action to alleviate U.S. concerns by focusing on all terrorist organizations “without distinction.” On Jan. 4th Pres. Trump suspended security assistance to Pakistan including $2b in defense aid tweeting on Jan. 1 that the U.S. gave it “$33bn in exchange for lies and deceit” while accusing Pakistan of arming and funding terrorists against U.S. troops.

· 2/10 – Elsa Artadi may wind up as Catalonia’s next President with self-exiled leader Carles Puigdemont possibly governing de facto from Brussels. A special council of the republic is being considered although Catalan law must be changed for that accommodation. Harvard graduate Artadi is Puigdemont’s loyal gal Friday. Puigdemont currently still faces arrest for charges of sedition should he return to Spain.

MARGINAL2018 US Recession?
Interest rates &
U.S. market volatility

· 2/11 – U.S. equity markets are currently in the midst of a historic, albeit transparent, efficient and healthy market correction. Volatility will continue to be exacerbated by hawkish interest rate outlooks in which UST yields swelled to four-year highs. Fears of increased inflation tied to high deficits and lower taxes have weighed on equity markets wiping out an estimated $5 trillion globally. The U.S. economy is doing well, earnings are positive but a correction leaves more room for stocks to plunge in light of valuations. Fed is forecasting 3 hikes in 2018. (Many forecast four hikes). Should the U.S. see 4 rate hikes in 2018 and 3 more in ’19, without inflation, as some are beginning to forecast, the U.S. would be heading straight into a recession.

· 2/06 – Russian Presidential elections were moved to March 18th by Putin to coincide with 4th anniversary of annexation of Crimea. Vlad Putin’ 87% approval rating effectively assures victory. Question is what happens in the 2024 election? Russian Constitution restricts position to two consecutive terms. Putin got around that issue in 2008 by installing Medvedev with Putin serving as Prime Minister (though he was in control). He could become Speaker of the Duma in 2024 and install someone else and then become President again. At 66 years of age and in good health, expect Putin to be around and in charge for the long haul.

Here’s a review of this week’s five key primary market driver averages for IG Corporates only through Wednesday’s session followed by the averages over the prior six weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS

MON.
2/12

TUES.
2/13

WED.
2/14

AVERAGES
WEEK 2/05

AVERAGES
WEEK 1/29

AVERAGES
WEEK 1/22

AVERAGES
WEEK 1/15

AVERAGES
WEEK 1/08

AVERAGES
WEEK 1/01

New Issue Concessions

3.50 bps

2.10 bps

N/A

2.67 bps

<0.13> bps

0.43 bps

1.73 bps

<0.725> bps

<0.79> bp

Oversubscription Rates

1.70x

2.36x

N/A

4.09x

2.98x

2.02x

2.15x

3.75x

2.85x

Tenors

11.50 yrs

22.57 yrs

N/A

14.85 yrs

13.80 yrs

5.74 yrs

7.43 yrs

8.12 yrs

7.80 yrs

Tranche Sizes

$600mm

$357mm

N/A

$823mm

$847mm

$623mm

$1,137mm

$747mm

$787mm

Avg. Spd. Compression
IPTs to Launch

<14.25> bps

<14.10> bps

N/A

<17.02> bps

<17.42> bps

<13.87> bps

<14.11> bps

<19.12> bps

<17.01> bps

New Issues Priced

Today’s recap of visitors to our IG dollar Corporate and SSA DCM:

Please Note: for ratings I use the better two of Moody’s, S&P or Fitch.

IG

Issuer

Ratings

Coupon

Maturity

Size

IPTs

GUIDANCE

LAUNCH

PRICED

LEADS

CSX Corp.

Baa1/BBB+

3.80%

3/01/2028

800

+110a

+95a (+/-5)

+90

+90

CITI/JPM/MS/UBS

CSX Corp.

Baa1/BBB+

4.30%

3/01/2048

850

+130a

+120a (+/-5)

+115

+115

CITI/JPM/MS/UBS

CSX Corp.

Baa1/BBB+

4.65%

3/01/2068

350

+165-170/+167.5a

+155a (+/-5)

+150

+150

CITI/JPM/MS/UBS

Daimler Fin. North America

A2/A

FRN

2/22/2021

400

3mL+equiv

3mL+equiv

3mL+45

3mL+45

BBVA/CITI/HSBC/JPM/MIZ/SG

Daimler Fin. North America

A2/A

3.00%

2/22/2021

550

+70a

+65 the #

+65

+65

BBVA/CITI/HSBC/JPM/MIZ/SG

Daimler Fin. North America

A2/A

3.35%

2/22/2023

675

+80a

+75 the #

+75

+75

BBVA/CITI/HSBC/JPM/MIZ/SG

Daimler Fin. North America

A2/A

3.75%

2/22/2028

625

+90a

+85 the #

+85

+85

BBVA/CITI/HSBC/JPM/MIZ/SG

PECO Energy Co.

Aa3/A

3.90%

3/01/2048

325

+95a

+80a (+/-3)

+77

+77

MIZ/USB/WFS

Indexes and New Issue Volume

Countable IG volume includes maturities of 18-months and out and IG-rated Preferreds.

*Denotes new high or tight.

Index

Open

Current

Change

IG29

56.17

52.971

<3.199>

VIX

19.26

19.13

<0.13>

CT10

2.903%

*2.910%

0.007

S&P

2,698

2,731

33

DOW

24,893

25,200

307

Nasdaq

7,143

7,256

113

OIL

60.60

61.42

0.82

GOLD

1,350

1,353

3

USD

IG Corporates

USD

Total (IG + SSA)

DAY:

$4.575 bn

DAY:

$4.575 bn

WTD:

$9.477 bn

WTD:

$13.777 bn

MTD:

$42.067 bn

MTD:

$60.117 bn

YTD:

$174.452 bn

YTD:

$247.317 bn

2018 Lipper Report/Fund Flows – Week ending February 7th

For the week ended February 7th, Lipper U.S. Fund Flows reported an inflow of $4.734b into Corporate Investment Grade Funds (2018 YTD net inflow of $19.478b) and a net outflow of $2.743b from High Yield Funds (2018 YTD net outflow of $5.858b).

Over the same period, Lipper reported a net inflow of $611.901m from Loan Participation Funds (2018 YTD net inflow of $900.938m).

The IG Corporate WTD total is 81.98% of this week’s syndicate midpoint average forecast or $23.15b vs. $28.24b.

MTD we’ve priced 64.06% of the syndicate forecast for January IG Corporate new issuance or $82.825b vs. $129.29b.

There are now 10 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

Mischler Financial served as a Junior Co-Manager on today’s Citigroup Inc.$1b 21nc20 Senior Unsecured Notes tranche. Thanks and appreciation to Citi Team Treasury/Funding and Syndicate for working with me today. Today’s 21nc20 tranche finished with a $1.9b book for a 1.90x bid-to-cover rate.

Mischler Financial also served as a Junior Co-Manager on today’s Deutsche Bank AG/New York Branch$2.15b two-part 3-year Fixed and FRN Senior Notes new issue. Thank you to Team DB Treasury/Funding and Syndicate for their patronage. Today’s DB 2-part finished with a cumulative 3.375b order book total for an overall oversubscription rate of 1.57x. The book splits were as follows – FRN: $875mm or 1.35x and the Fixed tranche was $2.5b (1.67x). NIC was about one nickel or 5 bps on both.

TPG Specialty Lending Inc. upsized today’s 5-year Senior Notes new issue to $150mm from $100mm at the launch and after skipping guidance.

The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 13 IG Corporate-only new issues was <15.52> bps.

The “BBB” (+121) asset class set new post-Crisis low.

The IG Average (+94), “AA” (+53) and “A” (+73) asset classes all tied their post-Crisis lows.

13 of the 19 major investment grade sector credit spreads (68.4%) either set or tied post-Crisis.

Here’s a review of this week’s five key primary market driver averages for IG Corporates only through Tuesday’s session followed by the averages over the prior six weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS

MON.
1/15

TUES.
1/16

AVERAGES
WEEK 1/08

AVERAGES
WEEK 1/01

AVERAGES
WEEK 12/25

AVERAGES
WEEK 12/18

AVERAGES
WEEK 12/11

AVERAGES
WEEK 12/04

New Issue Concessions

1.20 bps

2.35 bps

<0.725> bps

<0.79> bp

N/A

N/A

<1.46> bps

1.62 bps

Oversubscription Rates

2.29x

2.97x

3.75x

2.85x

N/A

N/A

4.64x

3.18x

Tenors

5.30 yrs

7.55 yrs

8.12 yrs

7.80 yrs

N/A

N/A

11.63 yrs

10.69 yrs

Tranche Sizes

$603mm

$1,131mm

$747mm

$787mm

N/A

N/A

$398mm

$576mm

Avg. Spd. Compression
IPTs to Launch

<15.80> bps

<13.41> bps

<19.12> bps

<17.01> bps

N/A

N/A

<18.18> bps

<16.34> bps

New Issues Priced

Today’s recap of visitors to our IG dollar Corporate and SSA DCM:

Please Note: for ratings I use the better two of Moody’s, S&P or Fitch.

IG

Issuer

Ratings

Coupon

Maturity

Size

IPTs

GUIDANCE

LAUNCH

PRICED

LEADS

Citigroup Inc

Baa1/A

3.142%

5NC4 F-t-F
1/24/2023

2,000

+87.5

N/A

+75

+75

CITI-sole

Citigroup Inc

Baa1/A

3.878%

21NC20 F-t-F
1/24/2039

1,000

+110a

N/A

+102

+102

CITI-s

Deutsche Bank AG/NY

Baa2/BBB-

FRN

1/22/2021

650

3mL+equiv

3mL+83.5a (+/-2)

3mL+81.5

3mL+81.5

DB-sole

Deutsche Bank AG/NY

Baa2/BBB-

3.15%

1/22/2021

1,500

+115

+102a (+/-2)

+100

+100

DB-sole

PhosAgro

Ba1/BBB-

3.949%

4/24/2023

500

4.375%a

4.125a (+/-12.5)

3.95%

+156.8

BAML/CITI/JPM/RAFF/REN/SG
SBER/UBS/UNI/VTB

PNC Bank NA

A2/A+

FRN

1/22/2021

400

3mL+equiv

3mL+equiv

3mL+25

3ml+25

CITI/GS/JPM

PNC Bank NA

A2/A+

2.50%

1/22/2021

900

+55a

+45a (+/-2)

+43

+43

CITI/GS/JPM/PNC

PNC Bank NA

A2/A+

3.25%

1/22/2028

700

+85a

+75a (+/-2)

+73

+73

CITI/GS/JPM/PNC

Toll Brothers Finance Corp.

Ba1/BBB-

4.35%

2/15/2028

400

4.50%-4.625%

4.40%a (+/-5)

4.35%

$100.00

CITI/DB/MIZ/STRH/WFS

TPG Specialty Lending Inc.

BBB-/BBB-

4.50%

1/22/2023

150

+225a

N/A

+212.5

+212.5

BAML/CITI/HSBC/JPM/STRH

Westpac Banking Corp.

Aa3/AA-

FRN

1/25/2021

500

3mL+equiv

3mL+equiv

3mL+34

3mL+34

BAML/GS/MS/WSTP

Westpac Banking Corp.

Aa3/AA-

2.65%

1/25/2021

1,000

+65a

+55a (+/-3)

+52

+52

BAML/GS/MS/WSTP

Westpac Banking Corp.

Aa3/AA-

3.40%

1/25/2028

1,000

+100a

+90a (+/-3)

+87

+87

BAML/GS/MS/WSTP

SSA

Issuer

Ratings

Coupon

Maturity

Size

IPTs

GUIDANCE

LAUNCH

PRICED

LEADS

Dexia Crédit Local

Aa3/AA

2.50%

1/25/2021

1,500

MS +low 30s
+32.5a

MS +29a

MS +27a

+45.90

BARC/CITI/GS/HSBC/SG

EDC

Aaa/AAA

2.50%

1/24/2023

1,250

MS +11a

MS +10a (/-1)

MS +10

+15.55

BAML/BMO/CACIB/JPM

Kommuninvest

Aaa/AAA

2.375%

4/22/2021

1,000

MS +6a

MS +5a

MS +4

+24.35

CITI/NOM/NORD/TD

Indexes and New Issue Volume

Countable IG volume includes maturities of 18-months and out and IG-rated Preferreds.

*Denotes new all-time high or tight.

Index

Open

Current

Change

IG29

48.007

47.998

<0.009>

VIX

11.66

11.91

0.25

CT10

2.538%

2.591%

0.053%

S&P

2,776

*2,802

26

DOW

25,792

*26,115

323

Nasdaq

7,223

*7,298

75

OIL

63.73

64.09

0.36

GOLD

1,326

1,327

1

USD

IG Corporates

USD

Total (IG + SSA)

DAY:

$10.70 bn

DAY:

$14.45 bn

WTD:

$23.15 bn

WTD:

$26.90 bn

MTD:

$82.825 bn

MTD:

$121.675 bn

YTD:

$82.825 bn

YTD:

$121.675 bn

2018 Lipper Report/Fund Flows – Week ending January 11th

For the week ended January 11th, Lipper U.S. Fund Flows reported an inflow of $4.186b into Corporate Investment Grade Funds (2018 YTD net inflow of $5.151b) and a net inflow of $2.651b from High Yield Funds (2018 YTD net inflow of $2.837b).

Over the same period, Lipper reported a net outflow of $12.514m from Loan Participation Funds (2018 YTD net outflow of $209.799m).

The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week

I am happy to announce that the “QC” once again received 100% unanimous participation from all 25 syndicate desks surveyed for today’s “Best & Brightest” edition! Thank you to all of them. 21 of today’s respondents are in the top 23 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table. The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates). The participating desks represent 81.33% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility. But it’s not only about their volume forecasts, it’s also about their comments! This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from. It’s a great look at the week ahead.

*Please note that these are Investment Grade Corporates only. They do not include SSA issuance unless otherwise noted.

As always “thank you” to all the syndicate desks that participated in today’s survey. I greatly appreciate your time to contribute and for making this edition of the “QC” among the most widely read! You are helping to promote Mischler’s value-added DCM proposition while adding readership to the “QC” that won Wall Street Letter’s Award as Best Broker Dealer Research in our financial services industry for three consecutive years! That’s 2014, 2015 and 2016 !!

Below is the opening segue to our weekly canvass of top fixed income syndicate desks..

“Good morning and TGIF Ahead of Thanksgiving week! I thought I’d start a bit early today as next week should, for all intents and purposes, be a two-day week..

Entering this morning’s Friday session –

The IG Corporate WTD total stands at $28.775b. We priced $535mm more than this week’s average midpoint estimate of $28.24b or 101.89%.

MTD we priced 87.21% of the syndicate projection for November IG Corporates or $84.054b vs. $96.38b.

Entering today’s session, the YTD IG Corporate-only volume is $1,271.993b vs. $1,226.792b on November 10th, 2016 or $45.201b (3.68%) more than a year ago.

The all-in or IG Corporate plus SSA YTD volume is $1,579.184bvs. $1,557.776b on November 10th, 2016 or $21.408b (1.37%) more than the year ago total.

Entering this morning’s session, here are the five key primary market driver averages for the 49 IG Corporate-only deals that priced this week.

Spreads across the four IG asset classes widened 1.50 bps to 8.25 bps vs. 6.75 bps as measured against their post-Crisis lows.

The 19 major industry sectors also widened 1.37 bps to 10.58 bps vs. 9.21 bps also as measured against their post-Crisis lows.

For the week ended November 15th, Lipper U.S. Fund Flows reported an inflow of $2.407b into Corporate Investment Grade Funds (2017 YTD net inflow of $111.988b) and a net outflow of $4.442b from High Yield Funds (2017 YTD net outflow of $12.951b).

Taking a look at the secondary trading performance of this week’s 52 IG Corporate and 2 SSA new issues, of the 54 deals that printed, 36 tightened versus NIP for a 66.75% improvement rate, 15 widened (27.75%) and 3 were flat 5.50%).

Entering today’s Friday session here’s how much we issued this week:

IG Corps: $28.775b

All-in IG (Corps + SSA): $84.054b

And now it’s time for today’s question “what are your thoughts and numbers for next week’s IG Corporate new issue volume?”

Thank you in advance for your time and contribution!

In this season of Thanksgiving I have many things to be grateful for and one of them are wonderful clients like yourself. Thank you for your friendship and participation here each week and on deal day. Wishing you and your family a great weekend and a very Happy Thanksgiving! -Ron”

Last week muni volume was about $10.2 billion. This week volume is expected to be $6.7 billion. The negotiated market is led by $737.0 million P3 private activity bonds for Virginia Small Business Financing Authority. The competitive market is led by $684.3 million general obligation bonds for Montgomery County, Maryland in 4 bids on Tuesday.

Below and attached is neither a recommendation or offer to purchase or sell securities. Mischler Financial Group is not a Municipal Advisor. For additional information, please contact Managing Director Richard Tilghman at 203.276.6656

For reading ease, please click on image below

Since 2014 alone, minority broker-dealer Mischler Financial Group Inc.’s presence across the primary Primary Debt Capital Markets (DCM) space has included underwriting roles in which Mischler has led, co-managed and/or served as selling group member for more than $600 Billion (notional value) in new debt and preferred shares issued by Fortune corporations, as well as debt issued by various municipalities and US Government agencies.

This document may be not reproduced in any manner without the permission of Mischler Financial Group. Although the statements of fact have been obtained from and are based upon sources Mischler Financial Group believes reliable, we do not guarantee their accuracy, and any such information may be incomplete. All opinions and estimates included in this report are subject to change without notice. This report is for informational purposes and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Veteran-owned broker-dealer Mischler Financial Group, its affiliates and their respective officers, directors, partners and employees, including persons involved in the preparation of this report, may from time to time maintain a long or short position in, or purchase or sell a position in, hold or act as market-makers or advisors or brokers in relation to the securities (or related securities, financial products, options, warrants, rights, or derivatives), of companies mentioned in this report or be represented on the board of such companies. Neither Mischler Financial Group nor any officer or employee of Mischler Financial Group or any affiliate thereof accepts any liability whatsoever for any direct, indirect or consequential damages or losses arising from any use of this report or its contents.

Last week muni volume was about $10.2 billion. This week volume is expected to be $10.1 billion. The negotiated market is led by $4.5 billion general obligation bonds for the State of Illinois. The competitive market is led by $712.5 million general obligation bonds for Washington Suburban Sanitary District, Maryland in 2 bids on Thursday.

Below and attached is neither a recommendation or offer to purchase or sell securities. Mischler Financial Group is not a Municipal Advisor. For additional information, please contact Managing Director Richard Tilghman at 203.276.6656

For reading ease, please click on image below

Since 2014 alone, minority broker-dealer Mischler Financial Group Inc.’s presence across the primary Primary Debt Capital Markets (DCM) space has included underwriting roles in which Mischler has led, co-managed and/or served as selling group member for more than $600 Billion (notional value) in new debt and preferred shares issued by Fortune corporations, as well as debt issued by various municipalities and US Government agencies.

This document may be not reproduced in any manner without the permission of Mischler Financial Group. Although the statements of fact have been obtained from and are based upon sources Mischler Financial Group believes reliable, we do not guarantee their accuracy, and any such information may be incomplete. All opinions and estimates included in this report are subject to change without notice. This report is for informational purposes and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Veteran-owned broker-dealer Mischler Financial Group, its affiliates and their respective officers, directors, partners and employees, including persons involved in the preparation of this report, may from time to time maintain a long or short position in, or purchase or sell a position in, hold or act as market-makers or advisors or brokers in relation to the securities (or related securities, financial products, options, warrants, rights, or derivatives), of companies mentioned in this report or be represented on the board of such companies. Neither Mischler Financial Group nor any officer or employee of Mischler Financial Group or any affiliate thereof accepts any liability whatsoever for any direct, indirect or consequential damages or losses arising from any use of this report or its contents.

Today the IG Corporate dollar DCM hosted 6 issuers that priced 12 tranches between them totaling $6.75b. The SSA space featured a $300mm 5-year Green Bond new issue from KDB bringing the combined IG Corporate and SSA day total to 7 issuers, 13 tranches and $7.05b.

Let’s now take a look at how this week’s IG Corporate volume numbers stack up against the WTD and MTD syndicate estimates:

The IG Corporate WTD total finished having priced only 64.84% of this week’s syndicate midpoint average forecast or $10.40b vs. $16.04b.

MTD we’ve now priced 91.42% of the syndicate forecast for June or $83.17b vs. $90.98b.

There are now 10 IG Corporate, Yankee and/or SSA new issues in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 12 IG Corporate-only new issues was <14.04> bps.

The Best and the Brightest” Fixed Income Syndicate Forecasts and Sound Bites for Next Week

Today’s IG Primary & Secondary Market Talking Points

Syndicate IG Corporate-only Volume Estimates for Next Week

Indexes and New Issue Volume

This Week’s IG New Issues and Where They’re Trading

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending April 19th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

What with the French Election this Sunday combined with today being a Friday session there was no new issuance to speak of in the IG dollar DCM. That’s now two consecutive days without IG issuance. I was out for two Fridays so, today is the first “Best & Brightest” edition since March 31st. Next week looks to be a relatively subdued one given continued blackouts and the fact that most all the big FIGs have already issued. As corporates exit and Treasuries rally with yields set to pull down further, all this leads up to what should be a VERY ROBUST May. The average for next week across the top 24 syndicate desks surveyed is $19.46b. The high was one desk that thinks we’ll see $30b and the low came from two desks that both said $10-15b or an average of $12.5b. But why let me tell you? I’m here for them. Please allow me to introduce you to the people who price YOUR deals. They’re all waiting below with their numbers and thoughts for next week’s IG Corporate issuance. So, without further ado folks…..let’s get to it!

Please remember to read the bold italicized question I posed to the Best & the Brightest as it contains this week’s complete data download that should be helpful to you.

The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week

I am happy to announce that the “QC” once again received 100% unanimous participation from all 24 syndicate desks surveyed for today’s “Best & Brightest” edition! 19 of those participants are among 2017’s YTD top 20 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table. 22 are in the top 25 in that same table. The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates). The participating desks represent 82.36% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility. But it’s not only about their volume forecasts, it’s also about their comments! This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from. It’s a great look at the week ahead.

*Please note that these are Investment Grade Corporates only. They do not include SSA issuance unless otherwise noted.

As always “thank you” to all the syndicate desks that participated in today’s survey. I greatly appreciate your time to contribute and for making this edition of the “QC” among the most widely read! You are helping to promote Mischler’s value-added DCM proposition while adding readership to the “QC” that won Wall Street Letter’s Award as Best Broker Dealer Research in our financial services industry for three consecutive years! That’s 2014, 2015 and 2016 !! More importantly, however, you are helping the nation’s oldest Service Disabled Veteran broker-dealer grow in a more meaningful and sustainable way. So, thank you all! -RQ

My weekly technical data re-cap and question posed to the “Best and the Brightest” early this morning was prefaced as follows:

“Good morning and Happy Friday!

First, here are this week’s IG new issue volume talking points:

The U.S. six-pack banks posted overall positive earnings. This week five of those for banks – ex-GS who did not yet print – represented 59% of this week’s IG Corporate issuance or $14.75b vs. $25.04b.

Spreads across the four IG asset classes widened 2bps to 18.00 bps vs. 16.00 bps as measured against their post-Crisis lows..

The 19 major industry sectors also widened by 3.53 bps to 23.16 vs. 19.63 also against their post-Crisis lows.

For the week ended April 19th, Lipper U.S. Fund Flows reported an inflow of $1.446b into Corporate Investment Grade Funds (2017 YTD net inflow of $43.426b) and a net outflow of $362.223m from High Yield Funds (2017 YTD net outflow of $4.271b).

Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 22 deals that printed, 14 tightened versus NIP for a 63.75% improvement rate while 6 widened (27.25%) and 2 were flat (9.00%).

Entering today’s Friday’s session here’s how much we issued this week:

IG Corps: $25.04b

All-in IG (Corps + SSA): $25.54b

This Sunday is the first round of the French presidential election. Congress returns to work on Monday in the continuing saga of Dysfunction Junction to address the debt ceiling, another rumored stab at repealing and replacing Obama Care, and any signs of tax reform. According to a very high end military official, the Korean peninsula has now reached its most intense point since the Korean War. Syria, Turkey, Russia loom large and a terror event that took place last evening in Paris, resulting in the death of a police officer in the heart of the city, are some of the major global event risk factors playing out in our inextricably global-linked world economy.

Please let me know your thoughts and numbers for next week’s IG Corporate new issue volume. Thank you in advance for your time.

Have a great weekend!
Ron Quigley, Managing Director and Head of Fixed Income Syndicate

Below please find the replies to this week’s QC canvass of fixed income syndicate bookrunners and my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

Mar 09 11 pm EST– March comes in like a lion and goes out like a lamb. Traders are hoping March does not come in like a bull and goes out like a bear.

Larry Peruzzi

On March 1, the Dow, S&P 500 and NASDAQ comp all closed at record highs, over the next 6 trading sessions the S&P declined on 4 of 6 days and had very small gains on the 2 other days.

On Thursday, the bull market celebrated its 8th year with gains of between 1bp and 8 bps in U.S indices. After 8 years, markets seem to be both tired and excited. Valuations are starting to be questioned but expectation of job growth and tax relief has few ready to sell; but an equally few are ready to jump in.

So, markets feel as though we are currently in a stalemate. Friday’s February employment report is truly the first report that will be more affected by the present administration rather than the former. It is being closely watched, and anticipation about the Feb report explains why the equities markets move this week has been muted. Investors have been calling for, and patiently waiting for, policy details. Friday’s report should give us something to digest for now.

Although the market moves this week have been narrow, news has been abundant. We have seen a new proposed health care bill, a new immigration policy effort, U.S shale production increase, a global bond rout, U.S dollar at highest levels in 2 months, South Korean President ousted from office and an EU summit all kept us busy. Monday’s Factory orders exceeded expectations, Wednesday’s ADP employment change exceeded estimated by a healthy 112K and Thursday import prices showed inflation seems to be under control.

After Friday’s employment report, I think that the next two most important events this week were: 1) WTI crude oil falling back below $50 (WTI is down 8.3% for March). This has always been a double edge sword. More money in consumers’ pocket, but decline in the energy sector is a drag on the economy and indices. 2) A largely overlooked surge in Household Net Worth, with both a positive revision to 3Q and a better than expected gain in 4Q. Simply put, more wealth equals more spending, which equals more jobs and growth. But we need to watch that inflation as well.

Looking ahead to next week investors will have plenty to digest. As this market moves more toward a dual factor market (taxes and jobs), we will be reminded of the other factors able to move the market. We get a good view on inflation with Tuesday’s PPI report for February and Wednesday CPI report for February. Wednesday’s retail sales figures will give us a clearer picture as to how much of the surge in household wealth has pushed through the economy. With recent weakness in the retailers, we will be watching the sales numbers closely. Later in the day on Wednesday, the FED will release its FOMC rate decision, in which a 25bps hike is widely expected. Fed Funds rate is actually pricing in a 100% probability of a rate increase; the accompanying comments will be of more importance than the action.

With Thursday’s February Housing Starts and building permits release we get a better idea of the health of real estate. Mild weather in February should help this number. The week concludes with Michigan sentiment reading. With the stock market near all-time highs, surge in household wealth and cheaper oil and gas prices in store, consumers should have reason to be optimistic. With the S&P 500 PE ratio continuing to creep up to 21.8, companies’ earnings need to be able to sustain these prices when 1Q earnings roll around next month, otherwise we could some profit taking on the rise.

But it all starts with Friday’s employment number.

Larry Peruzzi

Managing Director International Trading

Mischler Financial Group

Investment Banking | Institutional Brokerage

Ph: 1-617-420-8472

Larry Peruzzi is a 20 yr global trading markets veteran and brings a unique perspective to global equities market commentary via Mischler Financial Group, the securities industry’s oldest minority broker-dealer owned and operated by service-disabled veterans. Larry’s experience and best execution perspective stems from his sitting on ‘both sides of the aisle.’ For more than half of Larry’s career, he ran buy-side trading desks for Standish Mellon and thereafter, The Boston Company. In both of those roles, Larry was responsible for implementing and managing international equities trade execution. Larry’s perspectives are frequently cited by the leading financial news publishers, including The Wall Street Journal, Bloomberg LP and Reuters

Peruzzi’s Perch is a weekly synopsis of Everything Equities as seen from the perch of Mischler Financial Group’s International Equities Desk. Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, Peruzzi’s Perch is one of four distinctive content pieces produced by Mischler Financial Group.

Below and attached is neither a recommendation or offer to purchase or sell securities. Mischler Financial Group is not a Municipal Advisor. For additional information, please contact Managing Director Richard Tilghman at 203.276.6656

Mischler Financial Group debt capital market expertise, inclusive of Debt Origination, Distribution, Primary Market Access and Secondary Market trading across the full spectrum of fixed income markets is courtesy of our 18-member team of debt market veterans is what makes MFG’s Fixed Income Group a compelling partner to Fortune issuers, corporate treasurers, municipal debt issuers and the world’s leading institutional investors.

To illustrate our presence within the Debt Capital Markets space: since 2014 alone, Mischler has led, co-managed and/or served as selling group member for more than $500 Billion (notional value) in new debt and preferred shares issued by Fortune corporations, new companies via IPO, as well as debt issued by various municipalities and US Government agencies.

Mischler Financial Group is a federally-certified Service-Disabled Veteran Owned Business Enterprise (SDVOBE) and a recognized minority broker-dealer. Mischler Muni Market updates are provided as a courtesy to institutional clients of Mischler Financial Group, Inc.